Most avid readers of chinese kungfu novels will know Jing Yong’s "Tales of the Heavenly Sword and Dragon-slaying Sabre". This novel has been repeatedly dramatized by television channels in Singapore, Taiwan and Hong Kong. In fact one such drama series just finished airing in Singapore recently. In this classic novel set in the late Yuan Dynasty, there are two all powerful weapons, namely the Heavenly Sword and Dragon-slaying Sabre. Anyone who gets his hands on one of these weapons immediately becomes a top kungfu exponent in the land. So if you borrow the analogy, what are the Heavenly Sword and Dragon-slaying Sabre of Business? Read on….

To continue and conclude the story of this classic novel, there is this saying in the novel that the Dragon-slaying Sabre will rule supreme in the world, until its equal appears in the form of the Heavenly Sword. This riddle reveals the secret of the two all-powerful weapons. And the secret is that the two weapons must be combined to unleash greater knowledge that will help one gain control of the kingdom. What happens is when the two weapons are hit against each other, they reveal two items. The first is a martial arts manual that contains out-of-this-world and thus vastly superior martial art skills while the second is a book on war stratagems written by the famous Song Dynasty general, Yue Fei. It is these two items that provide the greater knowledge for one to gain control of the kingdom.

In the same way, in any business in this world, you can find in the Heavenly Sword and Dragon-slaying Sabre. What are these two all powerful weapons? They are Strategy and Operations.

The dictionary defines strategy as a plan designed for a particular purpose. This plan serves as the vision for the company. Of course before you can do up a plan for a company or a business, there must be some form of analysis of the industry and the market. This plan is thus not a plan in isolation but a plan on how the company can plot its path to profitability in the industry and market that it is in. This plan thus dictates how the Operations will be executed. So good Strategy presents a clear and precise plan for Operations to execute.

When you talk about strategy, you associate it with concepts like Competitive Advantage, Value Chain Analysis the BCG Matrices, Product Life Cycles or Strategy Maps (transformation of Balance Scorecard). While it is true that a good Entrepreneur or Businessman has a good gut instinct and uses that gut instinct to strategise his business, it is not fair to say that this is a mysterious instinct that has more to do with experience than business concepts. Often if you have the privilege of analyzing how these gut instinct decisions are made, you can articulate it pretty clearly with the business concepts that I mentioned above.

This talk about strategy leads to two extremes. The first is where a company fails to develop any long term strategy, often citing the fact that the industry or marketplace is too volatile for any fixed strategy. It feels that it needs to stay nimble and change as and when the industry or marketplace changes. This company ends up like some people prospecting for gold. Whenever someone finds some gold, they all rush to the spot near the person to prospect. They do not bother to evaluate which location out there has the highest likelihood for finding gold, and then focus on that location.

The other extreme lies with companies who over indulge in strategy. They draw nice maps, charts and do elaborate and tedious analysis. Often you need a guide just to walk you through the entire stacks of strategy papers and diagrams. However in doing up such an elaborate strategy, the crux now lies in navigating the complexity or debating the validity of the analysis. It deviates from the practical solution or the plan that strategy is suppose to point out. It fails to dictate how Operations should work or it makes Operations overly complicated. It thus becomes strategy for the sake of strategy.

Both these extremes will not work. Strategy should be simple to articulate yet based on careful and insightful analysis. It should dictate how Operations will execute and not just be an end in itself.

The dictionary defines operation as an activity in a particular area of industry/business or an activity often involving several people and spread over a period of time. Following from Strategy, Operations is the work done to execute Strategy. It thus has to take its lead from the plan and how the plan needs to be executed. Operations must take heed of the Strategy rather than merely working in isolation and then focus on its own efficiency or performance measures. A good Operation executes Strategy in a practical and profit maximizing way.

There are various aspects of operations such as Sales, Marketing, Research & Development, Production as well as Service Offerings. Each aspect of operation has its own measure of efficiency and performance but generally when you talk about Operations, you hear concepts like Six Sigma, ISO Certification, Learning Organisations, Economic Value Added and Total Quality Management. While the general rule is that Operations are kept as cost efficient as possible, there is an argument that it should be profit maximizing rather than cost efficient. It is conceivable that an Operation may incur huge costs but turn out higher than proportional profit. An example of this is a successful branding exercise.

So really Operations is about balancing between cost and scale. The guide to this balance is profitability, which should always be maximised. On one extreme, the Operations are run as lean and mean as possible. Nothing extra is spent and if something can be stinged on, it will be stinged on. On the other extreme, Operations are lavish and money is invested to produce or buy the best of breed Operation infrastructure, team or location.

Does it pay to be a scrooge when it comes to Operations? Definitely not. Someone who runs a lean ship, underpays his workers, buys second rate machinery or uses inferior raw materials cannot sustain the business. He faces the potential problem of disgruntled workers, high maintenance cost and high rejection rate. He may argue that he is pursuing cost advantage as a competitive advantage. Still cost advantage is better achieved and more sustainable as a result of economies of scale or comparative advantages from location to location. It is important to keep costs low, but not at the expense of profitability.

On the other extreme, there are those who spend on every luxury item there is, from overpaying their employees, buying equipment that is too advanced or has too much capacity or using raw materials that are better than the required specification. While in some circumstances, there is no material effect on Operations, except for the alarming increase in cost, there are other circumstances whereby Operations are hindered by unsuitable equipment or superstar egos. It is thus important to maximize profit and not be too lavish.

So really Operations is about executing Strategy. It requires Strategy as its guide and uses profit maximization as its meter for efficiency.

A very common phrase that you hear people say is "Other People’s Money" or "Other People’s Effort". This is basically REMM behaviour whereby we try to do as little work we can and still reap as much of a reward as possible. Though I would like to state that this is Politics at work rather than Strategy. We have explained Strategy above and I would like to draw a clear line between Strategy and Manipulation. While part of any good business plan is about reducing the work you need to do to get to market, I find it very hard to accept that a good Strategy is one where you have successful manipulated your partners to do all your work and bear all your costs. This manipulation is more in the groove of playing politics than being good Strategy. I have nothing against people who behave this way, but the last thing they should do is call themselves Strategists in my book.

There is also this issue of talkers and doers. The popular misconception is that the Strategist is the talker and the Operational person is the doer. We all acknowledge that "Talk is cheap" and in certain cases it is most definitely free, so how can this be part of Strategy? Let me define Talk here. Talk is usually vague and very sketchy on details. Talk usually paints a very nice picture, but you don’t know where or when the picture was painted. Strategy clearly spells out the plan for Operations to execute. Let me differentiate this.

Strategy : We believe differentiation as a competitive advantage is the best strategy as we are developing a handphone with the best features and best design. This is made possible by our focused R&D in wireless transmission technologies and ergonomics. With a targeted marketing campaign and carefully developed branding, we believe we can achieve enough market penetration in most markets to achieve approximately 20% operating margin for this handphone.

Also Talkers like to find Doers to execute their words. They often assume that the Doers should be focused only on execution and leave all the "strategizing" to them. However the problem in doing without thinking or appreciation of Strategy is dangerous. The Doer might optimizes the wrong aspect of the operations. For example the Talker asks the Doer to assemble all the consumer electronics and says he wants it done well. Actually the Talker wants the products to be well assembled and well tested. The Doer instead interprets getting it done well as getting it done fast. So he assembles the products in record time, does not bother to test them, packages them quickly and proclaims the job done. While the Operational person is very much likened to a Doer, he does not follow instructions blindly. At the back of his mind, he needs to appreciate the Strategy and be guided by the plan in his execution.

So very similar to the Heavenly Sword and Dragon-Slaying Sabre, Strategy and Operations need to be combined in order to bring success to the business. What do we mean by combined? Does this mean that one person has to be master both Strategy and Operations at the same time? Well, not exactly.

Within a company, there ideally should be one person focused on Strategy and another focused on Operations. The Strategist does the analysis and develops the plan. He is mindful of how this plan needs to be executed, in a broad sense, and includes this in the plan. So while the plan does have some specifics, it does not drill deep into the detail that the Operator will get to.

The Operator will then appreciate this plan and execute it in the way that best suits the Strategy while also maximizing profit. He develops all the details that are required for executing the plan and occasionally reflects execution issues back to the Strategist for re-evaluation. This feedback loop is important to the Strategist as he gets real life feedback and concerns. Of course the reality is that there are usually a lot of Operators and few Strategist. But I will leave the ideal number of Operators and Strategists to another article.

What I am suggesting is that the more the Strategist and Operator intertwine and work together, the higher the chance of success in the business. They should however not intrude into each other’s domain. The Strategist should not be too specific about every operational detail, while the Operator should not optimize or reinvent strategy to cater to the needs of the operations.

Both are equally powerful weapons in running a business but need to be combined in the right way to produce the best effect. And while it is theoretically possible for one person to be the Strategist and Operator at the same time, it does mean that he has to develop the split personality to play both roles. Often this results in the person not having much time left for anything else in his or her life.

So the next time you evaluate companies or run businesses, do be mindful of the two all powerful weapons of Strategy and Operations, respectively the Heavenly Sword and Dragon-slaying Sabre of Business. It is not sufficient to just focus on one aspect as both aspects are needed for a successful business. In fact they need to be well-intertwined. All Operations with no Strategy is like a bull in a china shop. And All Strategy with no Operations is like buildings castles in the air.

Any opinions or comments ?